The Euro Is Dead

The 'tragedy of the commons' or 'free-rider' dilemma of game theoretical cocktail parties is a great framework for considering the current tug-of-war between individual sovereign fiscal actions among the European Union and the over-arching monetary policy of the ECB. If the ECB is dovish and too many states decide to suckle on the teat of liquidity - as opposed to fiscally 'behave' - then everyone loses (as we see currently evolving). The lack of any Nash (stable and dominant) equilibrium among the European nations and their hoped-for benefactor is becoming increasingly problematic for both trading and business investment.

Nomura's Global Macro Strategy group tackle the problem that is now abundantly clear the euro area as currently constructed is not stable and so it will have to change (hence, the Euro is dead!). The direction of travel is being set out by northern European politicians and is worth noting – more Union not less. But two points are critical to note; first that the new euro area may be so different from the one the current members signed up to as to make a process of voluntary re-application for euro stage II necessary to determine future membership, and second that any new variable geometry euro will take a long period of time to set up. How then to cover the intervening period?

Kevin Gaynor, of Nomura, goes on to point out that while the market and global political pressure for the ECB to act as the bridge is now very loud indeed, many feel this option is not likely now. Kevin then sets up the framework for considering how the Euro will change and potentially emerge:

Game theory offers a route for thinking about these issues in a fruitful but parsimonious way. We can simplify this complex situation into a repeated “game” between the ECB and the fiscal authorities of the euro area. Each player can choose one of two strategies in this game, setting up four outcomes. The table below sets out the situation.

The fiscal authorities can behave or cheat. “Behaving” means instituting and sticking with substantial fiscal and regulatory adjustment. “Cheating” means avoiding that outcome.

The monetary authority can be hawkish, which in this context I take to mean no QE or dovish, offering full support for announced fiscal programmes that are aimed at guaranteeing future solvency.

Now the critical part is to consider how the actions of each party (ECB or sovereign nation) are dominant (or best) for themselves (or overall) and how that can lead to the free-rider (or unintended consequences) problems we have often discussed:

Let’s think about the pay-offs in each box. Behaving on the part of fiscal authorities leaves the ECB deciding whether to support or not. If the ECB takes a hawkish stance then the economy does badly and inflation falls below target – this is not a good pay-off for the ECB and makes the fiscal adjustment harder for the fiscal authority, and so hence I score it -1, -2 for the ECB and governments respectively.

However, if the ECB is dovish in this fiscal scenario then the economy, while doing badly owing to the fiscal tightening, does better than under the hawkish strategy, and so in this context I score it 0,0. This is the best combination of strategies available overall.

Now consider the “cheat on the fiscal stabilisation” strategy. If the fiscal authorities cheat and the monetary authorities go hawkish they both lose. Let’s call this the “leave the euro” box. The ECB doesn’t want the euro to break up, nor individual (or at least “important”) members to leave – its credibility would be lost and its independence could be put at risk. Similarly, we assume most governments would consider “exit” as a fairly substantial negative (we can debate this point of course since some would argue exiting would lead to better medium-term economic outcomes). I score this box as -2, -3 then.

Finally, we have the fiscal cheat and dovish ECB outcome. This is by far the best for the government and the worst for the ECB since its monetary credibility would be considered to be severely eroded in this outcome leading to free-rider problems whereby other governments start to renege as well. You may or may not agree with the scores, but it is how they rank that really matters in any event.

The question then is, is there a stable solution to the game? And the answer, in my view, is no. If the ECB unilaterally decides to go dovish then the fiscal authority is better off cheating which leaves the ECB worse off than if it had remained hawkish. Therefore, it doesn’t have a “dominant” strategy. Equally, there is no dominant strategy for the fiscal authority independent of what the ECB does.

But the game does have some important things to tell us. First, the ECB doesn’t want to drop into the break-up scenario and so it engages in tentative QE, better known as the SMP. It wants to keep the game alive, in other words. This is akin to the sort of signalling one expects in this sort of repeated game – rather like the USSR and the US at the height of the cold war. Taking the analogy further one tends to see proxy battles being fought in these scenarios – in which case Greece is our cold war Vietnam whereas Italy is the Cuban missile crisis.

How then to move forward? If the ECB is dovish then it invites a free-rider - we-can-ignore fiscal restraints attitude from the sovereigns BUT if the ECB is hawkish it crushes growth expectations and further exaggerates the potential downward spiral austerity-facing nations believe credibility will save them from.

Credible pre-commitment on the part of the fiscal authority is required in order for the ECB to decisively move to the dove camp. Fiscal tightening and regulatory reform are necessary but not sufficient conditions for the move to the behave/dove camp, in our view. Given it’s a repeated game, good behaviour should be rewarded but only in a marginal and reversible fashion.

That leaves markets facing an asymmetric risk/reward pay-off for the simple reason that the fiscal policies being undertaken are multi-year, painful, difficult to execute and conditional on stable political follow through. A virtuous circle where governments learn about the revealed preference of the central bank is entirely possible but would take time and would offer continual bouts of risk aversion on every opposition speech. Moreover, if the authorities look like they will not be a member of euro stage II then the central bank’s commitment should be expected to erode.

The other alternatives are more creative but, we think, entirely plausible. That is to make the cost of cheating much higher or remove the option entirely. In other words you make the behave strategy the dominant one under any ECB strategy. This could be achieved in three ways.

Option one is to ask an external body to take over fiscal powers – most obviously the IMF – in other words give up fiscal independence in the same way these countries have given up monetary independence.

Option two is to give up fiscal independence domestically by setting up a temporary but powerful independent fiscal policy making group (the supposed technocrat approach we are being told is occurring currently) – an option that has been discussed in academic literature before.

Neither of these options are particularly palatable and would be seen as a significant loss of sovereignty.

The final option is make the cost of exit higher in a credible manner. Beefing up contract law on debt wouldn’t help since default would still be possible since the debt is owed. Instead, it would be better to take an asset out. The most obvious one is FX and gold reserves. On the most recent IMF data, Italy, for example, has 78 million fine troy ounces of gold on its central bank balance sheet and around USD35bn of hard currency reserves. In contrast, Italy’s contribution to the ECB’s reserves is around EUR7.1bn. It remains anachronistic that the single currency area still has such an extensive system of national central banks (around 48,000 employees vs 19,000 at the Fed) and the bulk of currency and gold reserves held at the national level. Indeed, taken more broadly the region has around USD607bn of gold reserves at current valuations and USD204bn of hard currency reserves.

Thus, one option for making exit seem even less palatable is to not just withdraw and provide monetary support depending on behaviour but to ask for the national reserves to be pledged to a European authority to be held in escrow. Euro exit or losses for the ECB from support, or indeed financial sector losses from future backsliding could then be paid out of the lost reserves. This would no doubt be hugely unpopular and possibly illegal given central bank independence, but the point is of course that the reserves would not be lost if good behaviour is followed.

These options are highly unusual and politically dangerous, and so are only likely to be used in extremis. Instead, the real situation is likely to continue flopping back and forth between hawk/cheat and dove/behave boxes. Leaving aside whether the game is stable, we must ask whether that outcome is economically stable. And that depends on the fundamentals. A worsening growth environment, tightening private sector financial conditions and balance sheet deleveraging suggest that the short- to medium-term outlook is not conducive to the sort of reforms being promulgated. Moreover, a key component of the adjustment is supply-side reform; by its very nature this is about reducing the price of goods and services at any given level of supply. As such buying time for the fiscal adjustment to take place will be harder not easier.

Right now the onus is on new governments setting out their plans, for which the ECB is signalling its pleasure. But the next round of the game will likely be between the populations and the fiscal authorities, with the skew being toward weaker growth and higher unemployment.

And most poigniantly from the perspective of a Euro that stands relatively strong versus many other global fiat currencies - yet whose core faces not just the highest aggregate credit risk of any block but turmoil so potentially binary in nature that - as the title suggests - the euro as we know it now is indeed already dead and simply, slowly morphing to something else:

Without credible pre-commitment on the part of either the ECB or the fiscal authorities, the game framework indicates either a loss of independence for the ECB under substantial political pressure to shift unilaterally to the dove camp or EFSF/IMF assistance and the pooling of fiscal risks against the backdrop of a political agenda for a new euro area.

Perhaps given our earlier discussion of the EFSF's need to buy its bonds and the proximity of an election cycle (given the implicit US-Bailout that an IMF save would mean), we are more likely to see the ECB fold'em...though this week's schizophrenic EURUSD price action is impossible to know what is being priced in.

I nominate my hero Alan Greenspan to be the next face to grace the side of Mount Rushmore. He is the architect of the greatest financial catastrophe in the the history of the planet. Only he could engineer the complete and total destruction of the international banking cartel/Illuminati by making their entire banking system go bust on themselves.

Why do I bother? Ignorance is Bliss and Stupidity is Heaven.. You fucking Morons are a Plague upon ALL Nations that needs to be swept away.. so that a happier more intelligent World can be born.. and there is no better way to do that.. than to let you dumb fucks kill each other.. the rest of the idiots, the pockets of stupidity can be easily dealt with after the majority has killed itself off!

More immediately, a temporary cessation of use of the Euro could be a potentially massive destabilizing event. The rickety three legged table of global currency flows depends on the Euro, USD, and the JPY. The Japanese economy can't withstand a substantial and sudden appreciation given how high it already is. Which means there will be an ugly race between the US an Japan to devalue to keep export prices down. Gold should do well.

You gotta be crazy, you gotta have a real need.You gotta sleep on your toes, and when you're on the street,You gotta be able to pick out the easy meat with your eyes closed.And then moving in silently, down wind and out of sight,You gotta strike when the moment is right without thinking.

And after a while, you can work on points for style.Like the club tie, and the firm handshake,A certain look in the eye and an easy smile.You have to be trusted by the people that you lie to,So that when they turn their backs on you,You'll get the chance to put the knife in.

You gotta keep one eye looking over your shoulder.You know it's going to get harder, and harder, and harder as youget older.And in the end you'll pack up and fly down south,Hide your head in the sand,Just another sad old man,All alone and dying of cancer.

Ron Paul doesn't bow to the corporate hierarchy, he doesn't take their money, and he isn't corruptable. In short, he is the a nightmare for the ruling elite, and they will, by all means of nasty propaganda and psyops, marginalize him, and silence him before he awakens too many of the entranced masses. Paul's vision for America is liberty, but the elite don't want you to have it. They prefer you to be an easily managed slave, not a free man thinking for himself and acting in his own best interest.

After Nixon died they did a poll asking people if they had voted for him for President. With few exceptions everyone said, "No." No one wanted to admit otherwise.

When they had the Congressional vote for the first Quantatative Easing (QE 1) , Paul voted for it. People don't mention that now. The bottomline is that Paul acts, when need be, in his OWN SELF-INTEREST. He understands consensus. He understands being reelected. He is NOT like the late Senator Wayne Morse of Oregon, who was one of ONLY two men in Congress that voted against our FIRST involvement in Vietnam. In short, all our Statesmen are dead and gone.

Do you remember what Hunter Thompson said about Nixon ? He said Nixon belonged in the belly of a White Shark.

No, she identified and described the foundational problem besotting Western society; altruism. Where self-sacrifice is held as a virtue, the politics-of-pull peddlers thrive assisting you in your own oft-stated demand to be forced to server another, any other, as long as it's not you.

She understood in fine detail the effects of such a culture and wrote Atlas Shrugged. It's a great read and mystery and if you've actually read and understood her work, you'd see she loved life, she loved America because of its grounding in individual rights and that she would've really dug it if people had read AS and treated it as a warning.

Alan Greenspan understood her and her heroes perfectly. He chose to be a villain.

Given some of Greenspans historical writings on gold and such, I've always half-wondered if he intended to be Francisco D'Anconia on a grand scale and usher in the end. If you look back on video clips of his cryptic testimony and vague suggestions before Congress from the point of view that it was a satirical effort to distract the momo masses whilst inflating the mother of all bubbles, it becomes quite surreal.

He has to have known the consequences of his actions but his actions were the moral opposite of d'Anconia's. D'Anconia didn't hold the government's gun as Greenspan did. Government is force. Producers trade or refuse to trade; no initiation of force.

I see your point, but at the same time his "government gun" was one of temptation. He didn't force people to borrow as much as making it so lucrative that everyone charged forward with zeal to borrow without thinking about the eventual consequences. If it was an attempt at a D'Anconia-esque stunt, it was certainly a bit perverted to be sure. The reality is I don't think we'll ever know his true motives, but whatever they are I don't believe it was something as simple as price stability and full employment. He had to have known what he was doing and what it would eventually cause.

You are exactly incorrect Sir. The printing of unbacked money has taken a very private, destructive and greedy hand to accomplish....a hand that controls all forms of government. Your support of the Demon Rand's philosophy of Objectivism is foolish at best and evil at worst. Greenspan was simply a disciple....a pride-filled, stupid pond of a disciple (and unfortunately that's the most charitable description I have for him). To promote a philosophy that argues that the deeply flawed being known as Man is capable of self-regulating against the irresistable temptations of the seven deadly sins - while simultaneously demonizing the prime virtue of Charity is frankly evil to the core! Those that have been tricked by their own sinful faults into believing such toxic soul-destroying bile should seek whatever form of redemption is available to them....and they should do so quickly.....time is running out!

So, "the deeply flawed being know as Man" is incapable of self-regulating but has a fantastic knack for choosing his regulators?

Her view of Man is a heroic being, with reason as his means and his own life and pursuit of happiness as his rightful end. There's no demonization of charity in her philosophy, there's an objection to the idea that self-sacrifice is a virtue. Altruism doesn't mean charity, it means "other" and is a rejection of the idea that self-interest is virtuous. People are charitable and have every right to help anyone they wish.

You're playing word games with yourself....an objection to "self-sacrifice as a virtue" is an objection to charity - as all charity requires self-sacrifice. Please, go and pull the wool over someone else's eyes. If you really can't comprehend the evil of Randian philosophy - which has brought us to the brink of financial disaster...at least try to refrain from singing her praises.

The US Constitution is the law governing fraud. Your desire seems to be to insert a gubmint regulator between yourself and someone you'd voluntarily trade with even tho no fraud has occurred. Why? Why assume people who have goods or services to trade are inherently fraudulent requiring supervision? If fraud can reasonably be assumed to have occurred, that's when gubmint should step in. When you invite gubmint into your every transaction, you get the politics-of-pull; i.e., corruption.

Ron Paul will not save you ...sooner RP fans take their lives into their own hands the better

You will not be led, indeed should not look to be led, to the Holy Land. You are standing on the Holy Land, it's the space below your toes

You do not need to vote for someone or something. Your vote is worthless. Ron Paul doesn't stand a cat in hells chance. The US Govt has never been wise in its entire sorry history. The futility is 100%

You can only sort yourself out. Period. So if you want one political policy, enact it yourself: Stop Paying Your Taxes

RP is not the Messiah just as Obumma was not. You are all you are looking for. You have all the power to change course. You want change, just change yourself (everything else is fuking BS)

The police here in America (the Corporation) are here to protect one thing ,THE Corporation and to punish employee code breakers, if you have a social security number or a birth cert, you then are an employee of the Corporation from birth , that is why they tell you how to live . You gave up being one of "We The People" your sovereignty to the real United States of America ( you know the constitution) when your perents entered you into contract with a birth certificate to " United States" a corporation , so if you want to stop the system then take back your sovereignty and file your UCC-1 , and stop being a slave

Download " The Errent Sovereigns Handbook " by Augustus Blackstone it is a free publication and it tells you how to become a Sovereign again how to opt out of the tax syestem and stop prorerty tax , how to get supreme title for your land etc . If everyone did this the corporation would die very quickly . When you have done this the only laws that apply to you is the constitution

I searched a long time and studied a lot of crap before I found this. I am telling you, this is the real deal. In one fell swoop, this simple, unadorned website simultaneously teaches you how you were fooled and gives you the remedy for correcting what ills us in America. Like anything good in life, it requires hard work and a lot of determined study, but if you've ever wanted to drive your car without needing a license or having to have it registered, if you've ever wanted to stop being forced to pay income taxes (state and federal), if you've ever wanted to start a business without having to get a license, basically if you've ever wanted to live your life truly in liberty without having to ask permission to do so, this is the website for you:

The two are not mutually exclusive. One can take one's own life into their own hands while still voting for champions of liberty when the rare opportunity arises. If you believe the system will ultimately be unable to help, then you've nothing to lose by voting for him anyway. But you may save the lives of a few million Iranians.

The Road to Roota Theory postulates that there is a group of people in the United States as well as around the world that are working to remove and destroy the financial banking powers that have secretly controlled all aspects of our lives for hundreds of years. The original idea of this group sprang from the mind of Alan Greenspan and involved rigging markets with computer programs that he had invented in the 1960's.

You know Greenspan admited his mistakes following the very first derivative lawsuit when he and Larry Summers and the former Goldman guy shut down that female Brookeley Born chic that was the first person on the planet to see this shit storm we are now in. So what happenes Obama puts these guys back to business NEVER regulating derivatives. Geithner was 35 then and all in that shit too. Those guys should have been gone faster than the Athletic department at Penn State.

I am all for less regulation but this problem happened was bandaided but never fixed. The entire Congress had thier hands in this and never corrected it. It is way more than just Alan but sure as shit he could tried to do more even after he was out.

The US is in a great positon compared to the world to reapir and re-start the US and not pay the interest to other countries which means war. How many of those Capital hill dumb fucks will actually realize what their inactive and lobbying bank accounts have done to this country and the lives it will take.

Pakistan is a Moslem Nation and this current Zijacking of US citizens' continental defense is duly noted when its Moslem neighbor is at existential risk from US's chosen apartheocracy. Pre-emptive attack is a war crime. No amount of fear-mongering hysteria is going to change a bleeding thing A collapsing demographic island that has little but tribal self-interest and a history of self-congratulating species dominance..as if Global thinking was sleeping rather than awakening from its 9-11-01 sleep into 3-11-11 time, no longer Giuliani time.

The Fed wants a weaker dollar and is more than willing to print. The ECB wants a stronger euro and is resistant to printing.

At some point the Bernank will stumble onto the idea of printing dollars to buy euros and slaughter the euro shorts while making enough profit to fund the past 2 years of Fed monetization...or leverage up even more.

Buying euros better not become a part of the Fed's action. No way can the US public accept this action and this would insure the end of the Fed. Supporting a foreign currency is clearly not within their mandate.

Neither “hawk” nor “dove” fits the economic situation because they speak to different groups who have different feelings.

Some people see hawks as attacking the problem and others see hawks as the destroyers who sweep in and destroy.

As with all financial terms, they are ambiguous. The reason the financial sector and the financial press use terms such as these is to confuse. There are others terms to use that accurately describe what is going on.

It is all a part of the tissue of propaganda: all you need to do is go down to the bookstore and look at the books on the economy and realize they’re all rubbish – on the shelf one day, in the dustbin the next.

People form governments to protect their property and their interests and their rights; they do not form governments to develop international organizations run by bankers. By going down this road of central planning, which incidentally is not done by the elected governments but by the international bankers, you become entangled in the webs of debt, corruption, broken promises and servitude. In the end you are far away from the principles of your government and a market economy.

The body politic affected here are the citizens of Germany, and Italy, and Greece ... But yet we are not asking them. As a matter of fact, the people who are running this show are mortified that you would ask them.But every economist in America has an idea on what they should do… Goldman Sachs knows what they should do… Trichet and Draghi and Ackermann know… The crime is, these citizens have their lives and livelihoods and freedom at stake, yet they’re being handled by an unelected third party as crooked and as corrupt and as selfish as any entity ever created.These people will go to war for a dollar, wipe out villages, sink sovereign countries (Iceland)… They will do anything to make more money and gain more power - except, of course, to ask the citizens what they want… Too dangerous! Even the chance that a referendum might happen causes the markets to tumble.

My confidence in the potential for economic growth period is failing ... peak oil, overpopulation, never ending reduction in the value of labour due to automation and globalisation ... economic growth is becoming fantasy whether government tries to facilitate it or not.

don't fall for that propoganda of over population. there is no such thing as over population ; it's just another scam to get us all to feel badly about ourselves & 'save the planet' . there is plenty for all, plenty of everything for all; sustainable, renewable natural resources for all people .... 6 billion people is not a lot when spread out over the entire planet. It's those damn BANKER/ILLUMINATI types who want to introduce artificial scarcity into our lexicon & our lives.....asshole illuminatis ! always trying to wreck everyone elses lives & 'how can we make money off this' mentality.

Wrong! First off, our population has recently reached 7 billion people. 6 billion was soo 20 years ago! Second, the population was 1 billion around 1900. Now, if you can't see that the growth is compounded and that we have defined capacity limits in space and resources then I have a bridge to nowhere that you and your illuminati can purchase!

People require a BIT more than standing room to survive. Like, oh I dunno, food grown from a fossil fuel dependent infrastructure. Which depletes topsoil and has desertified one quarter of the worlds arable land. Or clean water, which is increasingly scarce. Or energy for heat (in cold climates at least) and cooking.

We could cram everyone who has ever lived onto Hawaii, easy. We would all then promptly die. Just because certain elitists advocate something doesn't mean it couldn't possibly be true.

Now the Western world doesn't have an overpopulation problem. But Africa sure does, and others. You have to look at what the sustainable population can be for an area/the whole system and compare it to where we are, not merely how much walking space we have.

I agree with you in theory. There is no way to get from here to there is the problem. The window of opportunity was wasted. So, overpopulation now IS a reality based on current system limitations and the social disaster we have allowed ourselves to fall into. Generations of training needed that instead was turned into generations of entitlement. The social systems are now so complex and fragile at the same time. Any serious shock to the system, and things could go the hell within a week. Etc.

But, the bigger problem is constant growth. If you look at the growth charts for human population it makes M1 money supply blush. It is not sustainable regardless of how nice we are to each to other. At some point, we will pay the price anyhow for this. Funny how our individuality is one of our greatest strengths and weakness at the same time.

Please dont get me wrong here lynnybee. I love what you are saying. IMO, one of the greatest mistakes we ever made as a species was falling into this ponzi economic trap right at the wrong time. We really needed every ounce of expertise put into smarter places - technological development for the greater good - not profit. Education (real education... not this canned crap we call it now). Community. And so forth.

I still think there is hope here. We can still get back on track. It will just be much harder to do. Between now and then, it is imperative that enough of the world wake up. In the past, I can easily see how difficult it was. Grapevine sort of information flow. This time, we have the internet! I really think the power of this tool is underestimated. Think about - you and I even having this exchange is simply amazing. We are probably thousands of miles apart.

Nice to see you around lynnybee. Hang in there! This world desperately needs people like you.

Absolutely agree with Centerline and Lynnbee. We have the capacity, we have the resources, we do not have the will because of the illusory economic model we've been trapped into. Automation is not the problem, it is the solution to our problems. We can use automation to produce surplus at little cost, and we can redirect human activity towards more fruitful pursuits, less internal competition for economic resources. We need to reengineer our economic / political / social systems. And I sometimes wonder if the devastation being perpetrated across the globe is a strategy to eliminate the concept of profit from the minds of the populace / equalize the wealth, to construct a society that is more humane. I don't trust the oligarchs to believe this, but that does not mean we cannot change their plans to suit our own agenda. If we keep fighting each other for the measly morsels still available, we hand over our power to the oligarchs because we remain divided as they want. If we instead cooperate and work together to ensure everyone's survival, we take power away from the oligarchs to oppress us. This oppression mechanism only works because of the complicity of everyone involved in the economy. We can stop that cycle of poverty. I am trying on my behalf.

Why do you think "we have the capacity and the resources?" For how many? 6 billion? 12 billion? 24 billion? At what average living standard? How will the current living standards of those above the average be reduced? When in the history of humanity has the species worked to ensure "everyone's" survival?"

This is what I was alluding to when I mentioned individuality. The "greater good" on a level needed for theoretical sustainability is either authoritarian at some level or a "hive" mentality (resisting the urge for a Borg joke now). What is really troublesome is that it seems the design of our montary systems has the same basic problems... it mirrors our behavior in a way. This is why there is no economic panacea either. Sure, the current system is flat-out evil... but what is next will definately have it's drawbacks as well. Evolution sure is ugly.

Planned parenthood is far better than starvation. We as a global society of human beings, need to come up with a planned parenthood limit on number of children that people can have, or you risk the devastation you see today. But more to the point of what I was getting at, we have the ability to create through appropriate application of resources / science, food / shelter for many billions more, but we decide not to, in order to comply with the dictates of our economic model. We could practice vertical farming, hydroponics, water reclamation, alternative energy, etc, and keep things localized, so you save on transport. We could share innovations / insights / medicines / food / water, keep people alive and work towards educating people on responsible childbirth. We build oil pipelines, why can't we build water pipelines? I don't suggest we keep multiplying at an exponential rate, but I also think we can come up with a better control mechanism than hunger.

So your argument could be summed up a: you're willing to let lots of people die because you cannot be bothered to come up with other means to improve the standard of living for many / everyone? You could have said the same thing before the industrial revolution. We need creative / innovative / out of the paradigm thinking, not conservation of failed paradigms. I'm fully utilizing my brain to try to solve the worlds problems. Can you say the same?

Now there's a good one. We, in fact, are a global agglomeration of tribes. Each tribe warring and killing as many of the other tribes as possible in order to confiscate their wealth. Times have not changed since we stopped dragging our knuckles on the ground. The weapons, however, have seen considerable improvement.

I don't think automation is a problem perse ... it's the combination of automation and globalisation/neoliberalism which is the problem. Sharing the workload as a society is necessary for social cohesiveness, and automation makes that impossible in the current system ... high unemployment while using wellfare to keep the median standard of living high breeds envy and hatred, while high unemployment without wellfare breeds deflation.

We will have to start reducing the work week to keep everyone employed, but the neoliberal race to the bottom is actually pushing us the other way.

We need to recognize that work is not necessary in many cases, that hard work is not noble, that people were duped into a belief system in order to maintain productive development, that conditions are vastly different now, and that we can abandon many of the memes which our culture conveys. We build tools to be more efficient, so it requires less effort / labor. There is nothing noble about labor per se, it is just necessary in some cases, in some time periods, but it may not be the paradigm going forward.

We have surplus productive capacity but we stifle it for risk or harming our economic welfare. We need to make that transition quickly or we will see significant upheaval as the world economy collapses. This really is a do or die situation. We either recognize we all can and must work together right now, or we will fail and a large percentage of humanity will just perish needlessly.

Work tends to not only not be noble, but highly inferior to leisure time ... the working population wants to see the unemployed suffer in poverty since they are not suffering work, most people are petty after all ... so it's politically far easier to spread the fruits of labour if the suffering is equally spread.

I read a study once, a few months ago, that linked acreage to population on basis of energy and food sustainability. I am really sorry I do not have the link. Anyhow, if I recall correctly, it showed we at about our current limit - based of course on the assumptions made in the model. I would suggest the model was kind and they we the limit some time ago (based on our current state).

Food is potential energy. There is a lot of evidence that suggests that energy production is being stifled to cause a shortage and profit a select group of power (no pun intended) elites. Energy should be cheaper than it currently is if innovation was free to run its course.

Food production per acre has increased substantially and the labor to produce it has decreased likewise in technologically advanced countries.

This is a great perspective on this increasingly binary - but totally FUBAR situation. Even if the 'new' euro were more core and less periph, the period of transition will be enough to significantly lower the EUR's value (were it to prove stronger post). The 'post' Euro would then 'strongly' disadvantage the core countries in their exports and if we have used EFSF to bridge the gap - guess where all that risk recession-prone crap contagiously aggregates?

These problems remind me of one of my favorite words: mamihlapinatapai - refers to "a look shared by two people, each wishing that the other will offer something that they both desire but are unwilling to do."

Why do I feel like running down the rabbit hole whenever I think about the dilemmas across the pond?

What happens if somhow everything gets marked-to-market all around the world and a few smart dudes realize that this so serious that , as all on ZH must suspect by now, the only real capital remaining is what is locked up in pms and oil----that the capital markets really are just debt and cannot be rolled any longer for lack of interest?

Please, keep your thoughts to yourselves because this question is not asked for any reason except to provoke thought.

I don't know a thing about this or really have an opinion, but am interested in what might out of a day or so's mulling this over by all here----we have a lot of genius on this site

I know, you said keep my thoughts to myself... I'm just jotting them down here so I don't forget later. ;)

The way I see the situation, the financiers / banksters / bought out politicos are not the ones who are losing. The global collapse is being perpetrated to plan. The regimes of the Middle East were changed to enable finer control of the collapse scheme. The regimes of Europe are similarly being changed to enable the same granularity and control. The US has already been under this form of regimented control, and the next "president" will be much the same, a complete asshole who breaks every law in the constitution, and sells out the people he gained support from, to the assholes who bought him dinner. The Asians are not out of the game (how ironic), they'll be taken care of when the time comes, but they will also deflate as the rest of the market deflates. India and China and Brazil and whomever... they're all doomed like the rest of us.

See, the problem is, the situation you describe is reversed. The world is not being marked to market. The world is being marketed to a mark. The global charade of debt is not being destroyed as vaporous venom. It is being held as if real obligation, and the globe is being marked to the debt. That is why the global finanicers can actually overwhelm the prosperity / value of a nation and become more powerful than the countries. It's a fascinating transition period to be living through... and dying through. There is a lot more to this story... how things will turn out is uncertain to me. People might rise up in disobedience, they may comply, they may act peacefully, they may become violent, the financiers may unleash armies on us, they may just choose to starve us, etc. There is no market, just debt, and we have lost all value in the market, we've however retained all value in the debt. Good luck with that.

Moreover, the people in the Netherlands are being kept in the dark as far as the extention of the financial crisis is going to have an effect on the transfer of (PIGGS) debt to public record here. It will be presented as a "fait accompli", that nothing can be done about it (anymore) in the near future. Therefore the present situation is CRUCIAL, as to not follow the steps of the FED, in monetising debt, which is the inevitable outcome of this "solution" presented as fact.https://www.youtube.com/watch?v=grCE0LPGBbI

Good stream of thinking. I for one don't buy into the notion that the complex is as coordinated in its actions as some do. In the end, there is an element of the game Survivor to all this: these narcissists see one and only one spot for top dog, and so the charade is to ally with those that eventually you plan to undermine/"vote out." With that duplicity at work, I think it's almost impossible for these folks to execute a chess game. The ponzi-on mentality is a function of the carnal instinct of the narcissists to not have the Jenga tower tumble on their watch so that they preserve the potential for being the one sole survivor. It's very destructive, but I think it's less coordinated than you suggest.

I lean toward your analysis. I think what we're seeing can be explained by a combination of environmental constraints, societal constructs (economic and political), and base human emotions like greed and fear.

I apologize, but I dont give human beings enough credit to put together this master plan. Vincent Bugliosi (a man who's intellect I respect greatly) makes an argument in his book outrage that a great constant within the human condition is incompetance. You cant order a drink without the bartender messing up, your bank makes idiotic errors every few months, your car mechanic always ends up making things worse. Why then are financiers and politicians any different? I think we would all agree that at least on the whole, they are not. Thats why I cant believe 9/11 truthers, illuminati pushers, etc. People are being driven by greed and taken low by incompetance. One can only pray that those who control nukes dont make that mistake eventually (almost happened under yeltsin due to satellite launch).. But a global mastermind conspiracy to enslave the human race? Naw, they just want us to buy Pepsi and keep getting elected so that "they" can keep getting nice dinners at Manhattan bistros and yachts on the riviera.

Sure, there may be some very competant people with a master plan, and maybe even some individual familes (Rothchilds, American banker clans) that are highly competant and have gotten bored with wealth, that only seek power at this point. Even GS may simply find that accruing wealth is easier if you greatly destabilize the systems that you once built up. Unfortunately, as with the Nazis at stalingrad, it will always be the italians and romanians on their flanks that bring the house of cards down every 25 years.

You cant order a drink without the bartender messing up, your bank makes idiotic errors every few months, your car mechanic always ends up making things worse. Why then are financiers and politicians any different?

+1

Agree completely. Macro-scale coordinated conspiracies are counter to human nature, particularly narcissists. And so if you agree with the notion that there is not grand plan, you must then move to another driver of behaviors...

You are right at the micro level, but not at the macro. A barman may screw up your drink, but one bar will provide more reliable overall results than another due to policies and strategies at the macro level that enable it to prosper in spite of the occasional hiccup.

Corporations have a momentum that is independent of a single brilliant CEO or incompetent CFO ... and we are now under the control of a "corporation" - one with a published mission, a published business plan and a number of steering committees all working to the same objectives. That corporation has stumbled before and will stumble again, but it is now effectively in a monopoly position and working with all of its acquired former competitors to progress the final end-game to total market (ie. world) dominance.

Ranger has nailed it ... though I do agree with you that it's not over yet and it's not too late for us to significantly delay their plans, but that won't happen while the sheeple continue to rely on voting and yet more [ignored] laws to address the issues at hand.

A multinational monopoly requires a multinational legal framework - hence the continued push for UN, WTO, WHO, FAO, WB, WC, etc rules to supercede national sovereignty in all areas of trade, commerce and taxation.

Our best---and indeed only---defense is to steer back towards granularity and diversity at a local, county and sovereign state level, They can't deal with that!

PMs are currency for the most part (although silver out of the ground might be called capital because of industrial use) and oil is a natural resources ... those are not capital, a factory is capital for instance.

I read the Germans wants to use this opportunity to remake Europe in its mold, and if successful be in of control a currency (Euro) to rival the yuan, and Chinese global influence in the 21rst century. Thus Germany will try to dominate until the last minute. But has hedged its plan by secretly preparing for the return of the DeutscheMark, which is why they will not sell their gold holdings. They will need the gold to partially backstop the new DeutscheMark. And why they will never leverage the EFSF beyond the point in which it would undermine the return of the DeutscheMark.

All eyes are watching what Germany does when the ECB sterilization program ends. We are in the end game. Concrete actionable answers within 3 months.

Seems as if the groundwork for the new feudal relationships are being laid; somewhat analagous to the 300 and 400 years A.D. as the Roman Empire dissolved. BTW it also seems as if the 'Dark Age' years were fabricated by the German HRE Otto so his reign would fall in the millenium LOL. Looks like our calendar should indicate that we're in the year 1711. Perhaps we begin to re-emerge sometime around the second milleniun A.D.

It is the Germans but it’s the German banks, it’s not the German people. The German banks are working with the international bankers to try to hold the eurozone together, but not for the benefit of the German people, but for using the eurozone as the puzzle piece to fit into world government.

And who controls Deutsche Bank? Josef Acikermann. And who is Josef Ackermann?

Designated as “the most powerful banker in Europe and, depending on whom you ask, possibly the most dangerous one, too,” Josef Ackermann is the man who has helped ECB’s Jean-Claude Trichet “shape Europe’s economic and financial future.“

A NY Times article, Deutsche Bank’s Chief Casts Long Shadow in Europe, the authors observed that it is no secret where the Jewish international banker’s allegiance lies: “with the banks.”

For instance, wrote the Times, Ackermann “has insisted that providing some sort of debt relief for Greece would be a huge mistake…

“European banks, including German ones like Deutsche Bank, hold many billions of euros in Greek government bonds, and the banks would lose big if those debts were restructured. For the moment, Europe’s solution for Greece is, essentially, Mr. Ackermann’s: more bailout money and more austerity — an approach that some economists say only buys time without offering any hope of recovery….”

The euro is printing money like there's no tomorrow, the largest European banks are insolvent and bankers are installing banker governors in every Eurozone country.

Everyone knows when you print a bunch of currency out of thin air, the value of that currency INCREASES, just like the euro has done the last several weeks. What does Germany have to worry about, just BTFD!

Weimar Germany and Zimbabwe were just exceptions. Kinda like having two 100 year floods in a row.

Too bad Madman Bernanke wasn't around when Enron went under. We could have all made a killing on the Enron ramp-up AFTER it declared bankruptcy.

I'm very sorry the government taxes their tips, that's fucked up. That ain't my fault. It would seem to me that waitresses are one of the many groups the government fucks in the ass on a regular basis. Look, if you ask me to sign something that says the government shouldn't do that, I'll sign it, put it to a vote, I'll vote for it, but what I won't do is play ball. And as for this non-college bullshit I got two words for that: learn to fuckin' type, 'cause if you're expecting me to help out with the rent you're in for a big fuckin' surprise.

It is futile to get pulled into a "rational argument" about what is happening, because the only logic that applies is control, as in "them controlling us."

When you deal with third world bureaucrats and they keep telling you to do this and do that, without ever allowing you to achieve your objective, it means they want a pay off.

In the global economic model, TPTB tell us to do this and do that to achieve some semblance of happiness and the pay off that is expected is total subservience. There is no rational argument to be made.

Well said. We stand between two abysses: mass ignorance that enables the controllers to control, and an enormous complex system with multiple instabilities that might undergo a systemic and catastrophic phase change at any moment.

You've just turned on the light in my mind, to the only viable solution:

What we need is New Leaders and new Rules of the Game, to end this "control issue" which is rotting the world from the inside everywhere.

The only way to end this peacefully and long term, is to find 21st century's men such as Madison, Hamilton, Jay, Locke, Coke, Blackstone, Monstesquieu, Lafayette, Rousseau, etc. and start writing a new set of rules, before the gloves come off and all the rules are definitively broken for good, bringing us back to stone age...

Thank you for providing a small ray of hope in the darkness of ZH's crowd